Insulation v. S. Brands, Inc.
| Decision Date | 14 September 2015 |
| Docket Number | 1:12-cv-00273-SEB-TAB |
| Parties | KNAUF INSULATION, GMBH, Plaintiff, v. SOUTHERN BRANDS, INC., ALBERT A. DOWD, ROSEMARY M. DOWD, Defendants. SOUTHERN BRANDS, INC., ROSEMARY M. DOWD, ALBERT A. DOWD, Counter Claimants, v. KNAUF INSULATION, GMBH, Counter Defendant. |
| Court | U.S. District Court — Southern District of Indiana |
This cause is before the Court on Plaintiff's Motion for Summary Judgment [Docket No. 45], filed on July 1, 2014, pursuant to Rule 56 of the Federal Rules of Civil Procedure. Plaintiff Knauf Insulation, GmbH ("Knauf") has brought this action againstDefendant Southern Brands Inc. ("SBI") to recover on a 2007 Promissory Note and on an account stated for SBI's unpaid invoices from 2008 to 2012. Knauf's action against Defendants Albert and Rosemary Dowd is to recover on a 2003 Personal Guaranty executed by the Dowds. Defendants have raised counterclaims against Knauf alleging violations of the Sherman Act, 15 U.S.C. § 1, and seeking judicial or equitable estoppel. Knauf has moved for summary judgment on all claims and counterclaims in this action.
For the reasons detailed in this order, we GRANT Knauf's Motion for Summary Judgment.
Prior to its dissolution in August, 2011, SBI was a fiberglass insulation distributor located in Powder Springs, Georgia for which Albert and Rosemary Dowd served as officers. Compl. at ¶ 2-3. In the late 1980's, SBI began to purchase insulation from Knauf, a fiberglass insulation manufacturer headquartered in Shelbyville, Indiana. Compl. at ¶ 1.
Throughout their relationship, the parties developed a pattern of business whereby Knauf required SBI to execute promissory notes for past due invoices and required the Dowds to execute personal guaranties to cover SBI's debt obligations as a condition of Knauf's continued credit to SBI. This practice began in 1988 when the Dowds executed a personal guaranty for the "full and prompt payment...of all obligations of [SBI] to [Knauf], howsoever created...now or hereafter existing." Dkt. 45-4 at 43-45. Thereafter,SBI executed a series of promissory notes secured, in part, by the 1988 Guaranty. Dkt. 45-4 at 7-39 (Notes: 1991, 1992, 1993, 1996, 1999, 2002).
In July 2003, as a condition of its continued opportunity to purchase insulation on account from Knauf, SBI again executed a promissory note ("2003 Note") which aggregated all past due invoices. Id. at 58. Around the same time, the Dowds executed another personal guaranty ("2003 Personal Guaranty") again covering the "full and prompt payment...of all obligations of [SBI] to [Knauf], howsoever created...now or hereafter existing." Dkt. 45-4 at 67-68. SBI satisfied the 2003 Note in August, 2006 but by 2007, Knauf claims that SBI had fallen behind on payments for insulation purchased on account by $1.8 million. In July 2007, Mr. Dowd met with representatives of Knauf to discuss the debt, and in December 2007, he executed a Balloon Promissory Note ("2007 Note") on behalf of SBI covering the full amount—$1,876,513.74. Dkt. 45-1.
Pursuant to the 2007 Note, SBI was to begin paying off the debt with a series of interest-only payments followed by a series of payments on the principal with the final payment due on May 15, 2011. Dkt. 45-4 at 78. According to Knauf, the last payment made by SBI on the 2007 Note was an interest-only payment received on October 15, 2008. Dkt. 45-4 at 80-81.
Despite SBI's delinquency on the 2007 Note, Knauf continued to sell insulation to SBI on account from 2008 to January, 2012, when Knauf finally ceased all deliveries to SBI. Dkt. 50 at ¶ 9. On January 31, 2012, in an attempt to reach an agreement on SBI's debt and in hopes of renewing their business relationship, Mr. Dowd executed a proposed"Forbearance Agreement," which recited in part that the amount of SBI's outstanding account balance was $1,625,086.98, that the account balance was past due and now owing in full, and that SBI was delinquent on its installment payments under the 2007 Note. Dkt. 57-3. This agreement set forward a payment plan for the outstanding account balance along with an agreement to amend and restate the 2007 Note. Id. However, the proposed forbearance agreement was never signed by Knauf and ultimately the parties were unable to reach an agreement on the payment of SBI's debts. On February 1, 2012, Knauf produced an "Account Statement" for SBI's open account payable which listed SBI's unpaid invoices which had accrued from October, 2008 to January, 2012, and, consistent with the proposed forbearance agreement, reflected a total amount due of $1,625,086.98. Dkt. 57-2.
When the parties were unable to reach an agreement on the payment of SBI's debts, Knauf filed this suit on February 6, 2012, seeking to recover from SBI $1,876,513.74 (plus interest) on the 2007 Note as well as $1,625,086.98 (plus interest) on "account stated" against SBI, and to hold the Dowds personally liable for the debts under their 2003 Personal Guaranty. Dkt. 1. Defendants filed their Answer to the Complaint on April 2, 2013, asserting counterclaims for violations of the Sherman Act and for "Judicial or Equitable Estoppel" Dkt. 16.
On July 1, 2014, Knauf moved for summary judgment on all claims and counterclaims in this case. Dkt. 45. For the reasons explained below, we GRANT summary judgment in favor of Knauf.
Summary judgment is appropriate when "the pleadings, depositions, answers to the interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In deciding whether a genuine issue of material fact exists, "the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). No genuine issue of material fact exists when a rational trier of fact could not find for the nonmoving party even when the record as a whole is viewed in the light most favorable to the nonmoving party. O'Neal v. City of Chicago, 392 F.3d 909, 910-911 (7th Cir. 2004).
A nonmoving party cannot rest on mere allegations or denials to overcome a motion for summary judgment; "instead, the nonmovant must present definite, competent evidence in rebuttal." Butts v. Aurora Health Care, Inc., 387 F.3d 921, 924 (7th Cir. 2004). Specifically, the nonmoving party must point to enough evidence to show the existence of each element of its case on which it will bear the burden at trial. Celotex v. Catrett, 477 U.S. 317, 322-323 (1986); Lawrence v. Kenosha Cty., 391 F.3d 837, 842 (7th Cir. 2004). Denials contained in the pleadings or bald allegations that a fact exists are insufficient to raise a factual issue. Colan v. Cutler-Hammer, Inc., 812 F.2d 357, 365 (7th Cir. 1987) cert. denied, 484 U.S. 820.
Knauf has moved for summary judgment on its claim to recover $1,876,513.74 based on the 2007 Promissory Note executed by SBI. Under Indiana's version of the Uniform Commercial Code, a promissory note is a negotiable instrument subject to Ind. Code § 26-1-3.1-104. See United States v. Lockett, 2008 WL 4936883, at *2 (N.D. Ind. Nov. 13, 2008) (citing Payne v. Mundaca Inv. Corp., 562 N.E.2d 51, 55 (Ind. Ct. App. 1990)).1 According to the UCC, a negotiable instrument may be enforced by "the holder of the instrument." Ind. Code § 26-1-3.1-301(1). The term "holder" means "the person in possession of a negotiable instrument that is payable either to bearer or to an identified person if the identified person is in possession of the instrument." Ind. Code § 26-1-1-201(20); see also Good v. Wells Fargo Bank, N.A., 18 N.E.3d 618, 621-22 (Ind. Ct. App. 2014). "The holder may recover on that instrument by producing the signed note, or a copy of the note, and proving that the note was executed and is now due and unpaid."Lockett, 2008 WL 4936883, at *2 (citing F.D.I.C. v. Skotzke, 881 F. Supp. 364, 366 (S.D. Ind. 1994)); Ind. Code § 26-1-3.1-308.
Knauf has produced the signed 2007 "Balloon Promissory Note" which describes the payment schedule agreed to by SBI, beginning with a period of interest-only payments followed by a period of payments on the principal with the final payment due on May 15, 2011. Dkt. 45-4 at 78. Defendants admit to signing the Note in 2007. Dkt. 45-3 at ¶ 5. Knauf has also produced a verified listing of payments made by SBI on the 2007 Note showing the last payment as an interest-only payment made on October 15, 2008. Dkt. 45-4 at 80-81. This evidence entitles Knauf to recover on the 2007 Promissory Note. See Lockett, 2008 WL 4936883, at *2.
"Once the holder has met this burden, the defendant must specifically plead and prove a defense to liability to avoid entry of judgment." Id. (citing Skotzke, 881 F. Supp. at 366 and Ind. Code § 26-1-3.1-308). Defendants have not pled a statutory defense in their Answer. Dkt. 16. Instead, they advance the following argument in their response Brief:
There is (sic) genuine issues of material of (sic) fact as to Knauf's crediting payments received from SBI to the Note, or to other claimed accounts under Knauf's obligation of good faith and fair dealing under Ind. Code § 26-1-1-203, as well as its obligation to mitigate damages. See Sheppard v. Stanich, 749 N.E.2d 609, 611-12 (2001).
Dkt. 50 at 9. Defendants have designated no evidence nor provided any citations to the record in support of their one-sentence defense. While it is true that contracts that fallwithin Ind. Code § 26-1 impose an obligation of good faith and fair dealing and a duty on a non-breaching party to mitigate its damages, the mere mention of these rules without reference to any fact or evidence is insufficient to defeat summary judgment.
Because Knauf has designated evidence of the 2007 Note, the...
To continue reading
Request your trial